Question - Slowly Company has obtained the following information about a proposed project:
Future sales $200,000
Future expenses, excluding depreciation $140,000
Depreciation expense per year $35,000
Estimated salvage value in 5 years 0
Cost of equipment $180,000
Cost of capital 10%
Income tax rate 40%
Estimated useful life (in years) 5
Depreciation method Straight-line
Present value of ordinary annuity at 10% for 5 periods 3.7908
Present value of one at 10% for 5 periods 0.6209
Required:
A) What is the net after-tax income per year?
B) What is the annual after-tax cash flow from depreciation expense?
C) What is the NPV of the project?